Bankruptcy Can Protect Your Retirement Accounts

A recent study by the University of Michigan School of Law found that an increasing number of people over the age of 65 are filing for Bankruptcy protection.  Fortunately, most retirement savings accounts are protected from liquidation during Chapter 7 Bankruptcy.  These accounts are also safe under Chapter 13.

The federal law, as interpreted by the U.S. Supreme Court, shields retirement funds in an employer pension plan under ERISA, as well as certain retirement funds classified under Sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code.  These Sections cover most retirement plans and include pension plans, profit sharing plans, stock bonus plans, employee annuities, IRAs, Roth IRAs, government deferred compensation plans, plans of tax exempt organizations, and certain trusts.  The Bankruptcy laws generally exempt these accounts -- up to one million dollars for each filing Debtor.  Other retirement accounts are protected if they are necessary for the support of the Debtor and the Debtor's dependents. 

While most retirement plans are protected in Bankruptcy, every case is different.  A 2010 case in Texas illustrates the complexity of protecting retirement funds.  In that case, the Court found that an inherited IRA did not receive the same retirement account protection under the Bankruptcy laws with respect to Chapter 7.  The Court held that the IRA would only receive retirement account protection in Bankruptcy if the Debtor was the account holder and not merely a beneficiary.

If you are experiencing debts you cannot pay, and have retirement funds that you want to protect, please call the Law Office of Nicholas R. Westbrook at (713) 893-6204.  Mr. Westbrook offers FREE consultations at various locations around Houston and will evaluate you individual situation, including all retirement accounts or potential retirement accounts.  In most cases, your debts can be discharged during Bankruptcy and your retirement accounts will remain protected from creditors.  To learn about all options and related issues, please call today.  Stop letting debt ruin your life.